Lecture 15

Lecture 15 - Outline I Legal Structures for New Businesses...

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5/28/2007 1 Outline - I • Legal Structures for New Businesses – Basic forms • Sole Proprietorship 5/28/2007 • Partnership • Corporation – Recent forms • Limited Partnerships • Limited Liability Companies (LLCs) • S-Corps Outline - II • Protecting your business – Patents – Copyrights 5/28/2007 Copyrights – Trademarks Legal Structure – Things to think about • Liability issues 5/28/2007 • Taxes
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5/28/2007 2 Sole Proprietorship - I • Not a separate legal entity – the owner is the business. 5/28/2007 • Advantages: – Easy to form (very small registration fees). – Profits “pass through” directly from business to owner and are taxed as personal income (~35%). No corporate business taxes. – Losses can be deducted from other personal income sources. Sole Proprietorship - II • Disadvantages – No Limited Liability – individual proprietor is responsible for all business debts. 5/28/2007 – Lack of continuity – e.g. if owner dies, business disappears (although assets go to estate). – Not really possible to raise equity capital. Partnership - I • Similar to a sole proprietorship except more than one person. Again not a separate legal entity. 5/28/2007 • Need detailed contract stating how profits will be distributed etc. • Advantages – again fairly easy to form, and profits “pass through” and face no corporate taxes.
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5/28/2007 3 Partnership - II • Disadvantages – Again, no limited liability – this is particularly important here because you can be liable for things your partner does. 5/28/2007 – Again, there can be lack of continuity if something happens to one partner (though this can be mitigated with buy/sell clauses in the partnership agreement, but this can be complicated). – Again, hard to obtain equity financing. Corporations - I • Corporations are separate legal entities from their owners. – “an artificial being, invisible, intangible, and existing only in the contemplation of the law” 5/28/2007 only in the contemplation of the law –cha r t e
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This note was uploaded on 09/03/2009 for the course ECON 106E taught by Professor Ackerberg during the Spring '08 term at UCLA.

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Lecture 15 - Outline I Legal Structures for New Businesses...

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